Canadian-dollar returns on US technology stocks are running 1.5 points worse than the Nasdaq Composite itself shows. From the October 6 close to Thursday, the index fell 5.4% in US dollars. The loonie rose 1.6% against the greenback over the same 17 sessions, so the same index fell 6.9% when measured in Canadian dollars.
The Currency Layer Beneath the AI Selloff
Alphabet fell about 13% by mid-session Thursday, its worst day since its 2004 listing, after a third-quarter report that Reuters said rekindled worries about ballooning AI costs. The Nasdaq Composite closed near 26,108, down 1.7%. The S&P/TSX Composite finished at 36,182, down 0.2%, with bank stocks helping hold it up in morning trading, according to the Canadian Press.
Over 17 sessions the TSX gained 1.5% while the Nasdaq fell 5.4% in US dollars and 6.9% in Canadian dollars, and the gap between the last two lines is the exchange rate alone.
Nasdaq in Canadian dollars is each Nasdaq Composite close multiplied by that session USD/CAD close. Oct 29 figures are as of approximately 4 PM ET.
The gap did not open on one day. USD/CAD slid from 1.4207 on October 6 to 1.3981 on Thursday and fell on 11 of the 16 sessions in between, so each leg of the technology drawdown reached Canadian-dollar statements with a currency move attached.
Why the Loonie Kept Rising Into Two Central Bank Decisions
The Bank of Canada raised its policy rate 25 basis points to 2.50% on Wednesday, its first increase since July 2023, and said further increases could be needed. The two-year Government of Canada yield rose 4.8 basis points to 3.417% that day. The Federal Reserve held at 3.75% to 4.00% the same afternoon, and Chair Kevin Warsh said he does not believe in forward guidance outside a crisis.
A central bank that is tightening and signalling more, set beside one that declines to describe its next step, gives currency traders one clear signal instead of two. Thursday data did not reverse it: US real GDP grew at a 3.4% annual rate in the third quarter while the PCE price index rose 2.1% and the core measure 2.5%, which gives the Fed less reason to hurry.
USD/CAD peaked at a 1.4282 close on October 12 and has since fallen 2.1%, finishing below 1.40 on both Wednesday and Thursday, the first closes under that level in the October data.
The Bank of Canada raised its policy rate to 2.50% and the Federal Reserve held at 3.75% to 4.00% on Oct 28. USD/CAD closed below 1.40 on Oct 28 and Oct 29.
The decision did not start the move. Convera noted before Wednesday that much of the expected hike was already in the price, and it cautioned that the loonie would need more than an anticipated hike to extend its gains.
What the Gap Carries Into Friday
Two features of the numbers persist past this session. A Canadian-dollar statement for a US-listed technology holding records the stock move and the currency move together, so the drawdown reads larger than the index headline. The TSX closed within 0.3% of its Wednesday level on a day the Nasdaq fell 1.7%, which means the Canadian-listed share of a portfolio absorbed none of the translation effect.
The December WTI contract traded near US$100 at midday Thursday, a level that supports the Canadian side of the exchange rate. Amazon reports after the close, and both central banks meet again in December. A further loonie gain would widen the gap again, and a move back above 1.40 would narrow it.